Wyndham to Face Lawsuit for Data Breach

As per media reports, a U.S. court has ruled that the Federal Trade Commission (FTC) should proceed with its lawsuit against Wyndham Worldwide Corporation (WYN) and its three subsidiaries, alleging failure to safeguard consumers' personal information.

The case began in Jun 2012 when the FTC accused Wyndham of failing to secure its computer systems. This resulted in three data breaches between Apr 2008 and Jan 2010. Due to the loopholes in Wyndham’s security system, hackers could access more than 600,000 payment card accounts and exported the data to an Internet domain address registered in Russia. Reportedly, this data led to fraud losses of more than $10.6 million. The FTC also claims that Wyndham failed to use firewalls, updated and patch software, and change default user IDs and passwords on servers.

Wyndham, the franchiser of Days Inn hotels and Super 8 motels, is not the only company to have faced such an allegation. Other companies have also faced such allegations and have settled with FTC paying as much as $10.0 million of fines.

However, in Sep 2013, Wyndham objected to FTC’s authority to sue companies on behalf of consumers for cyber security breaches or misleading data security policies. It also indicated that it was a victim and therefore should not be penalized.

Such incidents are a wakeup call for companies who still have a lax online security system. This exposes a vast amount of confidential information at the disposal of hackers who can utilize it for financial gains or for accessing intellectual property.

Wyndham carries a Zacks Rank #3 (Hold). Marriott International, Inc. (MAR) is a better-ranked stock in the same industry with a Zacks Rank #2 (Buy). Investors can also consider MGM Resorts International (MGM) and Las Vegas Sands Corp. (LVS) from the gaming industry. Both these stocks carry a Zacks Rank #2.